Black Friday is one of those things that most people in the UK would rather America not have exported.
Its first appearance on the British retail landscape in 2014 brought the kind of scenes rarely seen outside of rioting cities. Videos hit YouTube of mothers brawling over blenders, teenagers hosting pitched battles in shopping centers, and crushes in electronics stores. And its negative impact is not purely restricted to what it says about human nature and society’s obsession with consumerism. It isn’t even actually good for companies, and is an utter nightmare for finance directors.
Black Friday started off with relatively pure motives. A carefully selected range of goods was made available early in the day for rock bottom prices. The idea rested on the principle that the early morning traffic would carry on throughout day, and then the following 4 or 5 weeks leading up to Christmas.
As with all pure ideas, however, Black Friday became, as its name perhaps always suggested it would, a dark and twisted parody of itself. The idea of what constituted an ‘early morning start’ eventually became ‘late the previous day’, and then just ‘the previous day’, and a ‘carefully selected’ range of goods became ‘any and all’ goods. The day has become a farce, as people are beginning to realize. In 2015, a number of UK organizations decided that they were going to scale back their Black Friday operations. Asda - the pioneer of the Black Friday sales in Britain - and Tesco, for instance, chose to restrict opening hours and bring in additional measures to keep a check on the crowds.
This decision was driven by a number of factors. The cost of actually running the event, the negative publicity and the detrimental impact on staff moral were not compensated by sufficiently high sales to make it worthwhile. Many commentators also hold Black Friday and the constant stream of sales events responsible for poor seasonal retail figures, particularly around early September. Such discount bonanzas, the theory holds, rather than help build momentum going into the Christmas season as hoped, simply cause customers to wait for sales.
Another negative consequence of Black Friday is that it creates a so-called ‘scarcity mindset’. For finance directors, this has huge implications for stock levels, right at the time of the year when companies need to get their stock levels right.
The scarcity mindset refers to how the sales encourage speculative purchasing. The costs of items are so low that customers find it worthwhile to buy and try, and send it back if they don’t like it. This is especially true of online shopping, where consumers are not even limited by the space in their hands to carry goods home. Returns take time to cycle back round, with the time it takes before an item is ready to go back up for sale typically being between 15 and 21 days. This usually means it is off the shelves for the most important period of the retail calendar, and the CFO is faced with a quandary to which there seems little upside - either suffer depleted stock at a potentially vital time, or risk overstocking.
It is extremely difficult for a company to blink first and extricate itself from the yearly farce that has become Black Friday, as there is always that risk that everyone will go to the competitor that has remained part of the process. In the UK perhaps it is easier, as Black Friday is not so entrenched and has not really proven itself a hit in the same way, but there are still many risks. What’s clear is that there need to be changes, or retail will continue to suffer.